It is important to know your rights as a consumer – the National Credit Act (NCA) 32 of 2005 was brought about because consumers were being confused by difficult language and couldn’t understand everything that was written in their credit agreements. The NCA protects the consumer, but also the credit provider, by giving guidelines and rules to both on how to regulate credit agreements.
Here are some of the most important guidelines and rules that you should know as a consumer, and about the credit providers you are borrowing from:
- Application for Credit – Anyone has the right to apply for credit – this does not mean that you have the right to receive it (that will be dependent on your financial fitness, affordability assessment by the credit provider, and their own lending practices).
- Discrimination – Regardless of race, religion, pregnancy, marital status, ethnic or social origin, gender, sexual orientation, age, disability, culture or language your application must be assessed the same.
- Credit Assessment – When you apply for credit, the credit provider must take all reasonable steps to ensure that you can pay back the credit you are asking for to prevent reckless credit and over-indebtedness. If they do not check your ability to afford your loan, the credit provider will be guilty of reckless lending. However, if you do not provide correct information for them to make the assessment, you will not be protected in the event of reckless lending.
- Declined Credit – If your application for credit is declined, or unsuccessful, you have the right to receive the reason that you could not receive the credit in writing.
- Language – Credit providers must provide documentation that is written in language that is easy to understand. The documentation they provide must be available in at least two official languages. If you do not understand any of the points in the agreement, the credit provider has to explain them to you so that you can understand them. If you do not understand the terms of the credit agreement do not sign it.
- Documentation – The NCA states that you should be given a pre-agreement statement and quotation which is valid for 5 business days that shows you all the costs and terms of the credit agreement.
- Fees and Charges – The Act tells credit providers which types of fees and charges they are allowed to ask, and also states the maximum fees and charges they can ask for. Insurance cover on loans is required, but it must be reasonable, and a consumer can use their existing insurance instead of taking out a new policy if it can cover the requirements of the loan.
- Credit Information – Credit providers must report new, termination, or amending of credit agreements to credit bureaus in South Africa. If unfavourable information is going to be reported, the consumer must be informed before it is reported to the bureaus. You have the right to a free credit report once a year (with Compuscan’s My Free Credit Check you can check as many times as you like). You also have the right to ask about or challenge any information that comes up in your credit check that does not look right – the credit bureaus will investigate these on your behalf free of charge, and fix any wrong information depending on the outcomes of the investigation. The NCA also regulates how long a credit bureau can keep different categories of consumer information.
Knowing your rights is important to your financial health and will give you confidence when dealing with credit providers. Stay tuned for Part 2 of Your Rights as a Consumer.